POGO Sticks It to the SEC

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In our last episode of that ongoing Washington soap opera, “As the Door Revolves,” we introduced you to former federal prosecutor Mary Jo White, pursuer of drug lords and terrorists, who left government to become a hot shot Wall Street lawyer defending such corporate giants as JPMorgan Chase, UBS, General Electric and Microsoft. Oh yes — and former Goldman Sachs board member Rajat Gupta, currently appealing his insider trading conviction.

The New York Times reports that White and her husband, who’s also a corporate litigator, have a net worth of at least $16 million and investments that might be valued as high as $35 million. Now, courtesy of President Obama, Mary Jo White’s been named to head the SEC, the Securities and Exchange Commission — the very agency that regulates her clients and everyone else doing business in the stock market.

But as they say on late night TV, wait — there’s more! Join us for our latest episode of “As the Door Revolves” in which the door spins even faster between the SEC and big business. According to a major new report from the nonpartisan watchdog POGO – the Project on Government Oversight — hundreds of the agency’s former employees have done or are doing business with the SEC on behalf of the corporations the agency is supposed to regulate.

Imagine — hundreds with an intimate knowledge of how the place works advocating for their clients with friends at the SEC — colleagues who themselves may be looking for a big payoff when they, too, leave government.
Imagine — hundreds with an intimate knowledge of how the place works advocating for their clients with friends at the SEC — colleagues who themselves may be looking for a big payoff when they, too, leave government. From 2001 through 2010, 419 SEC alumni filed nearly 2,000 disclosure forms saying they would be representing companies or individuals coming before the commission. And that’s only the “tip of the iceberg,” POGO says, “Because former SEC employees are required to file them only during the first two years after they leave the agency.” In other words, after that first couple of years there are no official records kept so we can’t know how vast the problem is or even how far back it goes.

However, POGO writes, “Former employees of the Securities and Exchange Commission routinely help corporations try to influence S.E.C. rule-making, counter the agency’s investigations of suspected wrongdoing, soften the blow of S.E.C. enforcement actions, block shareholder proposals and win exemptions from federal law.”

No wonder the SEC has granted special waivers to business on some 350 occasions that, according to the report, “softened the blow of enforcement actions.” What’s more, a year ago, The New York Times reported that “Close to half of the waivers went to repeat offenders — Wall Street firms that had settled previous fraud charges by agreeing never again to violate the very laws that the SEC was now saying that they had broken.” The plot thickens, or in this case, sickens.

POGO also notes that in three instances — from 2008-2012 — when there were cases against UBS, the Swiss investment bank retained ex-SEC attorneys to argue on its behalf and was, in the words of the Times, “granted relief.” And when Obama’s first SEC chair, Mary Schapiro, pushed for reform of the $2.6 trillion money markets business, it was lobbied against by at least half a dozen former SEC staffers, and opposed by the two Republicans on the commission and one Democrat, Luis Aguilar, who used to be an executive vice president with the money management firm Invesco. The POGO report says that shortly after “Invesco sent a team to meet with Aguilar at the SEC and tell him why tightening rules for money market funds was a bad idea,” he came out against Schapiro’s plan, Coincidence? Aguilar told POGO there’s no connection. Sure.

When George W. Bush was president and named Chris Cox to run the SEC, we screamed like bloody murder, because Cox had been a partner at a huge global law firm whose client list included Deutsche Bank and Goldman Sachs. Now Obama’s pushing his choices through that same revolving door. It’s called “regulatory capture” — the takeover of government agencies by the very corporations they’re supposed to keep an eye on, to protect everyone’s investments and pensions against abuses of private power.

What’s next? Stay tuned. In the next few weeks, Mary Jo White will sit for her confirmation hearing and doubtless will be asked all about this by a committee stacked with politicians whose big donors include… the financial industry. You can read the complete POGO report here. Forward it to your own Member of Congress, then open your window and scream.

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  • http://oracleofburbank.blogspot.com Mark Etprophet

    Not that I agree with them, but this is why the tea-party has their Libertarian views about regulation. They see it as ineffective, costly to taxpayers, and since they seem to work for the people they regulate, too corrupt to be of any use.

  • Reddoor2

    Understood, except the chaos they leave in the wake of no government, no regulation, no rules is no better. The answer to bad government systems is changing the system to improve it-as was done with Glass-Steagall and the Sherman Anti-trust Acts. We would not have found ourselves in the position of needing to bail out too big to fail wall street if those laws and regulations were still enforced. What we need is good laws and enforcement of them, a congress that respects them, AND the means to mount a meaningful public referendum against abusing laws and regulations for political and financial gain via lax enforcement, as in Wall Street revolving door, or abuse of either enforcement-as in the Ken Starr investigation of Monica Lewinsky.

  • TheTransAtlanticRailroad

    How can we expect things to change when many of the people we elect to draft the laws to stop the revolving door between the SEC and the banking industry are looking at revolving doors of their own through which they hope to pass when leaving Congress?

  • http://www.facebook.com/michaeldavisoncpa Michael Davison

    Assuming, for the moment, that most businesses are ethical, and most want to hire professionals who have the specialized experience and skills to help them to successfully navigate a highly complex regulatory environment, then what’s wrong with the private sector seeking to hire folks who have experience working at the SEC, since they would be among the most qualified for those positions? This seems, however, to iimply the opposite – that most of these companies don’t care about experience, skill, or for that matter, regulatory compliance, and they want to somehow leverage the work relationships and networks of these former SEC employees in order to have regulators look the other way for any regulatory lapses. This implication impugns not only the companies and the former SEC employees which they hire, but also the current SEC employees, who would need to be complicit in such an arrangement for it to work. Also, in the absence of any supporting evidence, such an implication should not be made.

  • http://www.facebook.com/deleriously.happy Jeannine Seymour

    I distinctly remember the revolving door issue being one of Obama’s big campaign flags in ’08. What happened? He promised people in his administration would not work in the industry they had overseen during their public employment. That was one of my favorite ideas from his camp. Was it an ideal too big to implement? Just askin’ …

  • MBrecker

    I try not to laugh but sometimes when Obama makes appointments like this, I hear from lots of his hardcore supporters. Lay off the guy, give him a break. Did you really expect him to be making “perfect” decisions, considering what Bush left him? No. Then again, if he spends two years away from his family and almost a billion dollars for the world’s most powerful job, is he really going to dare to go against the corporate money that got him in?